German trade groups resist proposed EU legislation to provide more detailed information on social issues in annual reports
The EU’s plans for increasing transparency and requiring companies to offer much more detailed information on how they carry out social, environmental and employee strategies has suffered a crucial blow after being rejected by Germany’s four leading industry bodies.
Two resolutions the EU passed in February would require greater corporate social responsibility by making it compulsory for companies to show how they handled such matters in their annual reports. However in April, the groups, led by the German Federation of Employers’ Associations (BDA), condemned the EU’s proposed changes to accounting legislation that had been put together by Internal Market and Services Commissioner Michel Barnier.
In a joint statement with the German Federation of Industry (BDI), the Association of German Chambers of Commerce and Industry (DIHK), and the Confederation of German Craft Trades (ZDH), they highlighted concerns over having to declare certain internal information. The statement said: “Especially grave is that companies would be required in their annual reports to name fields of risk, containing highly sensitive internal information.”
Instead of enforced legislation, however, companies should continue to pursue the voluntary provision of such information, saying: “The essence of social responsibility of companies is instead the voluntary nature of their involvement.”
However, according to the EU Commission, only ten percent of Europe’s largest companies provide this information on a regular basis. Barnier said that: “Best practices should become the norm.”
His proposals were the result of two years worth of discussions with EU member states, businesses and NGOs. He said: “Companies concerned will need to disclose information on policies, risks and results as regards to environmental matters, social and employee-related aspects, respect for human rights, anti-corruption and bribery issues, and diversity on the boards of directors.”
Barnier added: “Under the proposal, large companies with more than 500 employees would be required to disclose relevant and material environmental and social information in their annual reports. The approach taken ensures administrative burdens are kept to a minimum. Concise information which is necessary for understanding a company’s development, performance or position would be made available rather than a fully-fledged and detailed ‘sustainability’ report.”
The commissioner went on to say that greater transparency in these areas offered many advantages to businesses that had already implemented them: “Companies that already publish information on their financial and non-financial performances take a longer term perspective in their decision-making. They have lower financing costs, attract and retain talented employees, and ultimately are more successful.”
“This is about providing useful information for companies, investors and society at large – much demanded by the investor community.”